As a mediator, it's frustrating to see time wasted on baseless issues, especially around termination clauses. While many are unenforceable in today’s legal landscape, some still hold. Yet, I frequently see plaintiff's counsel arguing against termination clauses that are clearly valid.
Many Termination Clauses are Invalid
Over my 25 years of practice, I’ve witnessed the pendulum swing back and forth between the enforcement of termination clauses and the protection of employees through their invalidation. In recent years, however, the pendulum has shifted further in favour of employee protection than ever before.
The reality is that the majority of termination clauses I encounter, both as counsel and as a mediator, would likely be deemed unenforceable if challenged in court. A key development in this area was the Ontario Court of Appeal’s decision in Waksdale v. Swegon North America Inc., 2020 ONCA 391, which clarified that if the termination with-cause provision has the potential to violate the employment standards legislation, the entire termination clause is rendered unenforceable. In Ontario, this means that if a termination clause allows the employer to dismiss an employee without notice or compensation for "just cause," the clause will likely be unenforceable. This is because Ontario’s employment standards legislation does not recognize "just cause" as a valid reason for dismissal; instead, it specifically refers to "willful misconduct."
The courts have ruled that there are situations where just cause for dismissal may exist without willful misconduct. As a result, a clause that references "just cause" sets a lower standard than the legislation requires, rendering it unenforceable. While this principle initially seemed anomalous, it has since been upheld by the Ontario Court of Appeal in Waksdale.
Subsequent cases have gone even further, holding that references to dismissal for cause in other sections of the employment contract — such as a confidentiality clause — can also invalidate the termination clause. In my view, it’s only a matter of time before a court examines other documents related to the employment relationship and uses provisions from those documents to invalidate the termination clause in the employment contract itself.
A recent development is the decision in Dufault v. The Corporation of the Township of Ignace, 2024 ONSC 1029, where the trial judge ruled that seemingly innocuous wording in a termination clause — specifically, one that allows the employer to dismiss an employee without cause at any time and at their discretion by providing the notice required by statute — could potentially violate employment standards legislation. Many employment lawyers view this as an overreach and do not expect the decision to be upheld. We may have greater clarity in the new year, when the Ontario Court of Appeal will rule on the case; however, it is entirely possible that the Court will dispose of the case without addressing the issue.
It is therefore fair to say that many termination clauses are unenforceable. But in some cases, I have seen counsel assert that the termination clause was unenforceable when there was no basis to do so. Doing this simply results in wasted time at mediation. In cases where an enforceable clause is in place and compensation has been paid, pursuing additional claims lacks legal foundation. Mediation then becomes challenging, especially if the employer resists settling beyond what's due.
In most wrongful dismissal cases, there is room for argument and negotiation regarding the appropriate calculation of severance. This includes determining the length of the notice period and how to value it, taking into account all forms of compensation, including variable components.
Focus on Your Strong Points
Plaintiff’s counsel don’t do themselves any favours by taking a "shotgun approach" — throwing out various claims to see what sticks. This not only wastes time and energy but is also a major reason why some mediations run well beyond the scheduled time. If parties could focus on the core issues from the start (the brief), they could engage in more meaningful negotiations much sooner, ultimately speeding up the process.
I encourage all counsel to approach mediation as efficiently as possible. Be clear, succinct, and focused on the core issues. Help your mediator understand the key points by presenting them in a straightforward manner. Remember, we are your advocate in the other room. The clearer you make it for us to grasp the strengths of your case, the more effectively we can present those points to the other side. For example, if you have a credible argument that the termination clause in question is not enforceable, explain your position clearly and succinctly. Counsel defending the clause can then do the same.
I have written and spoken fairly extensively on how to “win” at mediation. One key point is to spoon feed your mediator; make it easy for me to understand the strengths of your case and convey them to the other side. It also helps if you can avoid making me read through extensive allegations in your brief, only to learn at mediation that most of them were just for show. Dispense with the weak points and focus on your strong ones; that will get you a better result.
Feel free to reach out to me at stuart@rudnerlaw.ca if you’d like to see other materials on effective mediation advocacy, discuss how you can be a more effective advocate at mediation, or book me as a mediator or arbitrator.
Any article or other information or content expressed or made available in this Section is that of the respective author(s) and not of the OBA.